Snowflake Q1 2021 earnings: what to expect?

When does Snowflake announce its Q1 2021 results?

Snowflake (SNOW US) is scheduled to release its first quarter (Q1) earnings after the markets on Wall Street close Wednesday 26 May.

Snowflake shares: what’s expected?

A loss, is the consensus, for the three months ended 31 March 2021. Earnings per share (EPS) forecasts are for a loss of 19 cents, with the company forecasting its own revenue of between $195 million to $200 million. The Zacks consensus revenue estimate, though, is for an upside surprise which it has pegged at $210.7 million.

In quarter four (Q4), Snowflake produced an adjusted loss per share of 70 cents on a 117% rise in year-on-year (YoY) revenues of $190.5 million. The projected revenue numbers for the full year (FY) are between $1 billion to $1.02 billion, so there will have to be an acceleration in revenues at some point this year if that target is to be realistically achieved.

How is the company getting there?

In terms of the motor driving the improvement, it is clients using the services of Snowflake to undergo the transition from on-premises data centres to the Data Cloud.

At the conclusion of FY 2020 Snowflake chief executive officer (CEO) Frank Slootman said: ‘Remaining performance obligations showed a robust increase year-on-year, reflecting strength in sales across the board. Coupled with this rapid growth, we saw improving operating efficiency while expanding our footprint globally. These results indicate that customers across multiple industries rely on the Snowflake Data Cloud to mobilize their data and enable breakthrough data strategies.’

The outlook could be key

Can the company rely on the continuation of this shift on data into the cloud? There would appear to be no reason why not, certainly if this trend has the capacity to be maintained.

This is a view held by at least one analyst – Kash Rangan at Goldman Sachs. He upgraded Snowflake to ‘buy’ from ‘neutral’. In his note, he said: ‘The company expects to host its first analyst day alongside its annual user conference, Snowflake Summit, in early June, and we see the potential for the company to introduce a long-term outlook alongside additional details on new capabilities like support for unstructured data.’

When the upgrade was published, 14 May, the stock rose 11% and it has since it’s been on an upward trend. Significantly it remains well above its initial public offering (IPO) on 16 September 2020. At its IPO, Snowflake raised $3.4 billion and set a record as the largest ever US software IPO.

With the recent uptrend, questions will have to be asked as to whether the share price is now representing an upside surprise on the numbers that the market is expecting. In other words, both EPS and revenue will have to beat and there also to be an improved revenue outlook for the FY for there to a realistic chance of price action rising above and staying above the April highs of $243.

Any long position, going into the numbers would have a stop loss below recent price action at around the $210 level. If you believe a downside risk is prevalent, a short trade would have a stop loss above $243.